Massive China Production Cuts Are Huge for Steel Stocks: 5 to Buy for 2018

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U.S. Steel

This venerable steel producer remains a favorite at Deutsche Bank. United States Steel Corp. (NYSE: X) produces and sells flat-rolled and tubular steel products in North America and Europe. It operates through three segments. Its Flat-Rolled Products segment offers slabs, rounds, strip mill plates, sheets and tin mill products. This segment serves customers in the automotive, consumer and the combined industrial, service center and mining commercial markets.

The Tubular Products segment offers seamless and electric resistance welded steel casing and tubing, as well as standard and line pipe and mechanical tubing products primarily to customers in the oil, gas and petrochemical markets. The company also provides railroad services and owns, develops and manages various real estate assets.

And its U. S. Steel Europe segment provides slabs, sheets, strip mill plates, tin mill products and spiral welded pipes, as well as heating radiators and refractory ceramic materials. This segment serves customers in the construction, service center, conversion, container, transportation, appliance and electrical, oil, gas and petrochemical markets.

Shareholders are paid just a 0.75% dividend. The $32 Deutsche Bank price target was lifted to $36. The consensus target is $28.27, and shares were last seen at $28.55.

Ryerson

This is a top small cap play that could make sense for more aggressive accounts. Ryerson Holdings Inc. (NYSE: RYI) offers a line of stainless steel, aluminum, carbon steel and alloy steels, as well as nickel and red metals in various shapes and forms, including coils, sheets, rounds, hexagons, square and flat bars, plates, structurals and tubings.

The company also provides value-added processing and fabrication services, such as sawing, slitting, blanking, cutting to length, leveling, flame cutting, laser cutting, edge trimming, edge rolling, roll forming, tube manufacturing, polishing, shearing, forming, stamping, punching, rolling shell plate to radius, and processing materials to a specified thickness, length, width, shape and surface quality pursuant to specific customer orders.

Deutsche Bank lowered its price target to $15 from $18. The consensus target is $12.69. The stock was trading at $8.95 a share.

Constellium

This is another smaller cap, under-the-radar play that has big upside potential. Constellium N.V. (NYSE: CSTM) is a Netherlands-based company engaged in developing aluminum products for a range of markets and applications, including aerospace, automotive and packaging. Its manufacturing facilities are located in the United States, Europe and China.

The company’s products include can body stock, can end stock, auto body sheet, heat exchangers, specialty reflective sheet, aerospace plates and sheets, aerospace wing skins, plates for general engineering, sheets for transportation applications, soft alloys, hard alloys, large profiles and automotive structures.

The $15 Deutsche Bank price target is up from a prior $10, and compares with the consensus target of $11.14. The stock was last seen trading at $10.80.

The weak dollar has been very helpful to the industry for much of this year, and while the dollar won’t stay weak forever, you can bet that the administration would like to see it stay weak for the time being. With pricing firm, and export potential and demand at home still strong, these stocks make sense for growth investors of the rest of 2017 and into 2018.